Chinese chipmakers feel affected by US trade restrictions • The Register

analysis The Biden administration’s efforts to rein in China’s semiconductor industry seem to have caught the eye of chipmakers.

This week, Bloomberg reported that China’s Ministry of Industry and Information has called an emergency meeting and invited some of the country’s largest chipmakers to voice their concerns. Many, including Yangtze Memory Technologies Co., have reportedly called the Biden administration’s trade bans extremely damaging to their businesses.

While China may be an economic powerhouse, its domestic semiconductor industry lags behind that of South Korea, Taiwan, or – at least for now – the US by a number of years.

To date, we have seen evidence that China’s Semiconductor Manufacturing International Co. has the ability to make chips using 7nm processes. That’s an impressive feat and suggests that China could produce sophisticated products that can help China fulfill its ambitions for massive deployment of AI and the Internet of Things. But outside of China, Taiwan Semiconductor Manufacturing Co. and Samsung Electronics are preparing 3nm chips for mass production, and IBM has shown chips being manufactured at its Albany research fab that are just 2nm in size.

However, the recent White House trade bans – which ban the export of advanced semiconductor manufacturing equipment – have not been without consequences for US companies. During its first-quarter earnings call on Wednesday, Fremont, Calif.-based Lam Research warned that the government’s latest round of prohibitions could cost the company as much as $2.5 billion in lost sales in 2023.

Lam Research manufactures equipment essential for the production of high-end semiconductors for foundry operators. However, the ban on exporting the company’s technology to China has dampened the company’s prospects for the region.

Similarly, Applied Materials, another U.S. supplier of chip making kits, warned investors that Biden’s crackdown on Chinese chipmakers could cost the company between a quarter billion and a half billion in revenue in the fourth quarter.

The change in US policy also appears to have deterred Apple from its plans to use YMTC’s memory modules in iPhones destined for China.

Don’t expect US trade bans to go unanswered

The situation could get much worse for US companies doing business in China or relying on Chinese firms if — do this if — the Xi Jinping government retaliates. “I expected China to respond vigorously to Biden’s trade actions. The new trade restrictions clearly have a much broader and industry-wide impact,” said Wayne Lam, analyst at CCS Insights The registry.

According to Lam, the emergency meeting in China is instructive because it shows that the Biden administration’s actions have struck a chord and trade restrictions could be difficult for the Middle Kingdom to break. The damage is so severe that Lam believes the US needs to assess whether it launched an economic cold war with China.

“Expect China’s full response after they consider their options and that will tell us how serious this is going to be,” Lam said. “Biden policy is quite significant and it will be difficult for China to embrace and adopt the new restrictions. The question will be how severe is their reaction?”

The bans are bad enough that some have speculated that China could seek to seize the technology it needs to compete on the global semiconductor stage by invading Taiwan and seizing TSMC’s facilities. However, Taiwan National Security Bureau director-general Chen Ming-tong has downplayed these concerns. He argued that TSMC’s facilities would be essentially useless if China seized them because other nations would respond by cutting off supplies of materials, intellectual property, electronic design software and manufacturing equipment.

The US keeps pushing

Washington has steadily increased pressure on Chinese chipmakers in the months since Congress approved the $280 billion CHIPs and Science Act, which funds manufacturing on U.S. soil, amid bipartisan efforts to reduce reliance on the End US of foundries in Asia Pacific. Its latest measures banned the export of US semiconductor equipment and software to 31 Chinese chipmakers and institutions. The government has also gone so far as to ban US citizens and green card holders from working for Chinese firms at the risk of losing their citizenship.

However, there is no reason to believe that the trade ban will actually last – especially if the Department of Commerce has not changed course. A Wall Street Journal The August report showed that the Ministry of Commerce approved the vast majority of license applications for exporting controlled goods to China. It will therefore be difficult to assess the effectiveness of the US restrictions for some time to come.

Meanwhile, it looks like Beijing might be ready to ease its purse strings even further if that means ending its reliance on US chip technology, at least according to a recent Bloomberg report. Of course, only if the government manages to clean up its own big fund funding Chinese chip startups to help them compete against offshore rivals.

Although the Big Fund has spent heavily, it has a poor track record. And in recent months, several senior executives at companies managed by the fund have been accused of misconduct by the national anti-corruption agency. ® Chinese chipmakers feel affected by US trade restrictions • The Register

Rick Schindler

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